Some Predictions about U.S Environmental Policy Under President Trump

USC’s media team emailed me asking for some pithy comments about the election’s consequences for environmental policy. The full article is available here. In this blog post, I will elaborate on my thinking.

Here is my quote:

Climate change: A future of “what ifs?”

“The United States just ratified the COP 21 Paris Carbon Mitigation agreement. Will President Trump choose to withdraw from this treaty? If the U.S. government retreats from carbon mitigation efforts, will companies such as Tesla and Solar City continue to be profitable? If greenhouse gas emissions continue to rise, will environmental policy now focus on adapting to climate change? Will China stick to its pollution reduction efforts if the U.S. reduces its effort to address sustainability challenges?”

MATTHEW KAHNProfessor of economics and spatial sciences at USC Dornsife

My short answers to my own questions are; yes, maybe, yes, yes.

President Trump has lived most of his adult life in Manhattan. He owns billions of dollars of Manhattan real estate. His children and grandchildren live in this coastal city. He is a very smart man (yes, I said that) who recognizes that some of our major cities face significant climate change resilience issues. He will withdraw from the COP 21 treaty. Fossil fuel taxes will decline in the United States and green subsidies for electric vehicles and solar will be phased out at the Federal level.

I believe that the Trump Administration will make a push on investing in risk resilience (this is climate change adaptation even if these words are never spoken in public). On December 6th 2016, I will be presenting my new climate change adaptation work as part of the Brookings Institution’s Hamilton Project and I’m eager to speak to members of the Trump Administration concerning how to implement the ideas I discuss in my report.

China will stick to its plans to have its GHG emissions peak by 2030. As Siqi Zheng and I discuss in our new book, China seeks to reduce the amount of electricity it generates from coal for several reasons. First, its local air pollution would decline if more power is generated from clean sources. Second, China seeks to be a leader in exporting green technology to the rest of the world. Thus, it is building up its own home market because it believes in learning by doing effects. Third, China’s CCP leadership is eager to shed its NY Times image as world environmental villain. China’s President Xi would enjoy “giving” that label with President Trump. This is an age of “soft power” and “hard power” (i.e military might). If China can earn a reputation as a “good guy”, then it will have more success in Africa and other areas where it wants to expand its exports and reach.

Returning back to the U.S, the coastal elites will find that President Trump will pass legislation that permits and accelerates drilling and searching for fossil fuels and transporting such fuels in the U.S. This will create “jobs” and some rural wealth and more pollution. This pollution will rain down in local rural areas. I do not predict that air pollution will increase in coastal cities in the East or West. The coastal elites (including myself) have not figured out a way to transfer $ to the rural areas to compensate such individuals for playing by the “San Francisco” rules.

Finally, Tesla. Can Elon Musk earn a positive profit without the “Green Industrial Complex” backing him? Or will he move to China to earn his profits while taking ample government subsidies? Is his “sustainability business” sustainable without government subsidies? President Trump offers some “exogenous variation” to test this hypothesis. Of course, Mr. Musk would say that fossil fuel vehicles are implicitly subsidized because we don’t have a carbon tax. Let’s not debate the theory of the 5th best, instead let’s see if great American companies are great. I hope Tesla succeeds and I’m planning to buy one in the near future.